DEPA and the Path Back to TPP
July 15, 2021
The United States has a strong national interest in being part of the Trans-Pacific Partnership (TPP) or something like it. The Biden administration has no intention at present to rejoin TPP. If those two statements are true—as I believe they are—then another path to eventual U.S. participation in TPP (or something like it) needs to be found. The White House is reportedly considering the option of pursuing a digital trade agreement with willing Indo-Pacific partners. While this approach has merit, there may be a better way.
To repeat a well-known refrain, U.S. participation in a comprehensive, high-standard regional trade agreement like TPP would serve three sets of national interests: economic, strategic, and “strategic economic.” It would make a small but significant addition to U.S. and global economic growth. It would demonstrate a lasting commitment to the Indo-Pacific region beyond the U.S. military presence there. And, most important, it would advance the nation’s strategic economic interest in updating and upholding U.S.-preferred rules and norms in a region representing half the world’s population and economic activity.
The Biden administration has made clear that it has no intention of pursuing traditional trade agreements like TPP. In his first major speech as secretary of state, Antony Blinken said the administration had learned “hard lessons” from previous trade agreements and that its trade policies “will need to answer very clearly how they will grow the American middle class, create new and better jobs, and benefit all Americans.” Testifying before Congress in May, U.S. Trade Representative Katherine Tai steered clear of any commitment to an early return to TPP.
The Biden team knows that keeping TPP at arm’s length puts the administration in an awkward position with Asian allies and partners, who want to see the United States credibly engaging on trade as part of a broader strategy for the region. This is what draws the White House to a digital trade agreement. Accelerated by Covid-19, the digital economy is growing rapidly, yet there are few agreed international rules to govern this space. China, Europe, and others are moving to fill that void, establishing rules and norms on privacy, data management, and internet governance that are often at odds with U.S. interests.
Proponents of a digital trade agreement in the Indo-Pacific argue that it would be easier to negotiate than a comprehensive deal. For one thing, there is a lot of existing work to build on, including the digital rules in TPP and the U.S.-Mexico-Canada Agreement (USMCA), as well as in bilateral deals such as the U.S.-Japan Digital Trade Agreement and the Singapore Australia Digital Economy Agreement. Moreover, as proponents point out, a sectoral deal on digital issues would not require formal approval from the U.S. Congress, since the United States would be making no new market-access concessions.
But there are three potential problems with a digital trade agreement. First, it would likely take significant time to conclude. Trade negotiations always take longer than expected, especially if they involve many diverse parties, complex issues, and high ambition. Second, the domestic politics will be challenging. Aligning business, labor, consumer, and government interests on sensitive digital issues will be difficult, and Congress will take an intense interest in the negotiations. The third, more substantive problem is that trade is only one dimension of the digital economy where rules and norms are in play. There are a range of other issues—from digital inclusivity to ethical standards for artificial intelligence—that arguably cannot or should not be captured in trade agreements.
As it happens, these issues and more are covered in an arrangement already up and running in Asia: the Digital Economy Partnership Agreement (DEPA). A non-binding undertaking to deepen cooperation in the digital economy, DEPA currently brings together Singapore, New Zealand, and Chile (three of the original four TPP members). It involves a dozen “modules” of joint work, including on digital inclusivity, small and medium-sized enterprises (SMEs), cross-border data flows, and cybersecurity. As a platform for discussion of non-binding principles and best practices rather than a formal trade negotiation, DEPA enables experimentation and an ability to address new issues quickly.
Some would argue, not without merit, that a non-binding arrangement does not accomplish as much as a formal treaty. But there are several counterarguments: First, DEPA’s “soft” approach to rulemaking and norm-setting has proved effective in an Asian context, as evidenced by the useful work in the Asia-Pacific Economic Cooperation (APEC) forum (including on digital governance). Second, docking onto DEPA would enable the United States to quickly start shaping rules and norms in this critical area, rather than going through the drawn-out process of formal trade negotiations. (That said, some of DEPA’s existing principles may not align with U.S. interests, and existing members would need to be willing to discuss alternative approaches.) Third, DEPA would provide a platform for Washington to pursue its broader interests in the digital governance realm, beyond commercial interests. And finally, DEPA’s modules on digital inclusivity and SMEs would allow the Biden administration to highlight its efforts to “benefit all Americans.”
Asian allies and partners want the United States back in the regional trade game as quickly as possible. If early U.S. reentry into TPP is off the table for now, President Biden will need to come up with a credible alternative by the time he appears at the annual APEC summit in November. The president should announce the United States’ intention to join DEPA and make this a centerpiece of his regional economic strategy. Combined with new initiatives in other important areas of economic policy such as regional infrastructure, clean energy, and women’s empowerment, this could go a long way to persuading skeptical Asian allies and partners that the United States is back and serious about its long-term economic engagement in the region.
Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
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